Homogenous and Heterogenous Contestants in Piece Rate Tournaments: Theory and Empirical Analysis

Tomislav Vukina and Xiaoyong Zheng

No 6540, 2008 Annual Meeting, July 27-29, 2008, Orlando, Florida from American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association)

Abstract: In this paper we show that sorting different ability contestants in piece rate tournaments into more homogeneous groups alters incentives for agents to exert effort. In particular we show that for a given mean of the tournament group's ability parameters, larger variance (more heterogeneous agents) induces higher optimal effort. This implies that the principal can actually gain from heterogenizing the tournament groups. On the other hand, the effect of this change on growers' welfare is unclear because higher effort leads to higher productivity and hence higher payment, but also increases the cost of effort. Using broiler production contracts settlement data we empirically estimate a fully structural model of a piece rate tournament game with heterogeneous players. Our counterfactual analysis shows that under reasonable assumptions the integrator's gain is actually larger than the growers' losses indicating that heterogenizing groups in piece rate tournaments may be efficient.

Keywords: Research Methods/ Statistical Methods (search for similar items in EconPapers)
Date: 2008
View list of references

Downloads: (external link)
http://purl.umn.edu/6540 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:ags:aaea08:6540

Access Statistics for this paper

More papers in 2008 Annual Meeting, July 27-29, 2008, Orlando, Florida from American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association)
Contact information at EDIRC.
Series data maintained by AgEcon Search ().